Morgan Stanley advises to buy Meta shares on the downturn. Why does he expect them to grow by 45%?

"It's time to buy Meta stock," Morgan Stanley analyst Brian Novak wrote in a note to clients. He estimated that the risks of social media regulation are exaggerated, and that advances in artificial intelligence and advertising tools could drive the stock up 45%. Meta shares are down 19% this year, but Wall Street is unanimously advising against selling them.

"It's time to buy Meta stock," Morgan Stanley analyst Brian Novak wrote in a note to clients cited by MarketWatch. He called the Facebook owner his new favorite in the Internet sector.

According to Novak, negative market sentiment toward Meta is at an all-time low, and the current drawdown has created a "tactical buying opportunity" for the stock. The analyst's key argument was the company's valuation: shares of Meta are trading at a discount of about 55% on a PEG ratio (share price to earnings growth ratio) relative to other large technology companies. That's below their 10-year average by one standard deviation - a situation like this has only been seen three times in the past decade, Marketwatch quoted Novak as saying.

The analyst sees additional growth potential in the development of the AI-direction. In particular, we are talking about the possible launch of the MetaClaw agent solution, which could lead to multi-billion dollar investments and open up new sources of revenue, including digital sales within the company's platforms.

Automated advertising tools for small and medium-sized businesses may become another reason for Meta's stock growth, the analyst believes. According to Novak's assessment, improving the efficiency of advertising will allow Meta to attract a larger share of advertising budgets.

The Morgan Stanley analyst also believes that fears about tightening the regulation of social networks are exaggerated. In his opinion, against the background of global competition in the field of AI, the US authorities will be interested in supporting national technological leaders.

Novak lowered his target price on Meta shares from $825 to $775 due to macroeconomic factors, but his forecast still calls for growth of about 45% from current levels.

Meta shares came under pressure last week after losing two landmark lawsuits about how social media influences young users. The company, which is challenging the rulings, was ordered to pay about $380 million - a tiny fraction of its revenues. However, the courts' positions have led investors to wonder about possible tighter regulation of the company's advertising business model, MarketWatch notes. Legal experts warned that the rulings could trigger massive litigation similar to the legal campaigns against the tobacco industry in the 1990s, Forbes wrote.

Meta shares fell more than 11% last week amid the courts, and 19% since the beginning of the year. But this week investors began to buy out the drawdown. At the end of trading on March 30, quotes of the company rose by 2%. The average analysts' target price is $859, which is 60% above current levels. No analysts on Wall Street polled by MarketWatch now recommend selling Meta shares.

This article was AI-translated and verified by a human editor